The increase in the prices of assets has continually put families in the middle class in unfamiliar situations financially. However, there are several of tips these families, and other parties can utilize to reduce or entirely remove the total inheritance tax bill (IHT) that is to be paid.
The first tip focuses on pensions. It is advisable to pass your pension on to your next of kin as part of your estate. As per the current rules, safeguarding pension for your heirs is easier as they can be excluded from being part of your estate. This means that no tax accrues to the persons(s) you pass it on to. For more clarifications, seek expert advice so that it can be established whether this provision can be made use of on your pension.
The second tip is utilizing Business Property Relief which includes the transfer of shares in unquoted companies. The value of assets being transferred that may be obligated to IHT is reduced by a whopping 50-100%. Again, a financial planner is essential in pinpointing the modalities to follow in this process.
The third tip is to distribute your assets and wealth as gifts. For gifts you give out from your regular income, there’s no tax imposed. However, gifts that have significantly high value are the ones that may qualify for tax. Also according to Gary Smith, a financial planner, the secret lies in starting to distribute the gifts early enough, at least seven years in advance.
The fourth tip is to consider charities. If one leaves to charity 10% ofan estate, total IHT owed falls between 40% -36%. This is beneficial especially when your family is receiving your assets – they will receive over 90%. Moreover, the payable tax will be minimal hence saving an enormous amount of payable tax.
Lastly, the final tip is insurance, especially for investors. An insurance policy on your life can come in handy whereby the income from the policy is excluded from one’s estate. Hence IHT does not apply to it. The strong point of this tip is that insurance policies are written in confidence and trust.
One of the best ways before establishing ways to reduce inheritance tax bill is to engage the services of a financial or tax consultant. Have you ever engaged the services of one? Which tips do you see yourself applying to minimise your IHT?